Comic Fodder

State of a Comic Book Company: Marvel's Money

Most of us read comics for the enjoyment, hoping for a good story that entertains, moves, and/or enlightens us. A smaller number collect them for investment purposes. But there are others out there who actually invest in the company itself, recognizing the potential the characters hold for movies and merchandising. This month we take a look at the real business numbers involved with the imaginary characters of Marvel Comics.

The 2008 financial guidance covers the third quarter and the nine months that ended on September 30 of 2007. The company raised its guidance for net sales and net income, which basically means they think they will be pulling in more money for the next reporting period. As a public company, Marvel is required to issue guidance every quarter, and if a company misses the earnings target that the market analysts have set for it, it means the stock price will plummet. Analysts had expected results of 28 cents earnings per share (EPS) of the company, and revenue of $90.5 million. Instead, Marvel reported 45 cents EPS and $123.6 million in revenue.

Before I give you a bunch of numbers that talk about the comic sales themselves, let’s discuss the stock. The results on Wall Street changed recommendations to investors on whether to buy, sell, or hold their shares in the company. Some analysts changed their recommendation to a “strong buy.” On the stock market itself, the price jumped from about $23 per share to $27. It has spent the month since then jumping up and down between $27 to $29 per share. I had purchased 75 shares a couple years back at $18, and set a stop-loss order when it reached a 50% profit, at $27. I had mostly forgotten about it, since it is not that big of an amount, but I received an e-mail to tell me the brokerage had sold my stake, which prompted me to go find out why the price rose so fast all of a sudden.

What is in the report itself that caused all the excitement? Last year their net income was $13.2 million for the third quarter. This year, from their revenue of $123.6 million, their net income after costs was $36.3 million, and that jump translates into a rising stock price. The items highlighted as a major reason for the good sales were merchandise from the Spider Man 3 movie, and on the comic side itself, World War Hulk and Stephen King’s Dark Tower series.

The areas Marvel has interests in (and makes money from) are publishing, licensing, toys, and now film production. After some bad economic deals with the first Spider-Man movie, Marvel took out a loan to fund making all of their movies in-house from now on, as it were, and handing the movie over to a distribution partner when it is finished. The question is, can Marvel have continued success at this level? There won’t be a new Spider-Man movie out in the next couple of years. They are counting on Iron Man and Hulk 2 being big hits, which is a pretty good bet, actually. The movie itself and related merchandising should pull in just as much money as the spider-Man movies did, and Iron Man has the potential to do just as well as the wall-crawler, based on the visual feast that has been leaked from movie shots already.

More numbers:
• Licensing doubled to $66 million
• Publishing sales increased $4 million, 13%, to $34.9 million
• Toy sales decreased from $33 million in third quarter of 2006 to 422.7 million
• Their new guidance calls for the company to have net sales of up to $400 million for 2008, with a net income (or profit) of $118 million on the maximum upside, an EPS of $1.50.

So there you have it, a peek at the money behind a comic book empire. Any questions? Post below. I am not a licensed financial advisor, so I cannot recommend whether to buy or sell a stock, but I can attempt to answer any related questions you might have.
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Tpull is Travis Pullen. He started reading comics at 5 years old, and he can't seem to stop.